Tag Archives: Growth

LAHORE: Pakistan has been relegated from 74th to 77th rank in ‘ease of doing business’ by the World Bank and needs to introduce wide-ranging reforms in enforcement of contracts, employment of workers and payment of taxes in order to improve its ranking.

The World Bank report on Doing Business has rated Singapore as the best place in ‘ease of doing business’. Malaysia, ranked 20th, is the top Muslim country in the index which evaluated 181 economies, improving its ranking from 25th position in 2008. Pakistan which was ranked 74th in 2008 is placed at 77th place for 2009.

The World Bank has evaluated these rankings on the basis of official procedures and data gathered from member countries. It does not, for example, examine security, macroeconomic stability, corruption, labour skills of the population, underlying strength of institutions and quality of infrastructure. Continue reading →

Too much focus on broad issues, such as rule of law and accountability, runs the risk that policymakers will end up tilting at windmills while overlooking the particular governance challenges most closely linked to economic growth

Economists used to tell governments to fix their policies. Now they tell them to fix their institutions. Their new reform agenda covers a long list of objectives, including reducing corruption, improving the rule of law, increasing the accountability and effectiveness of public institutions, and enhancing the access and voice of citizens. Real and sustainable change is supposedly possible only by transforming the “rules of the game” — the manner in which governments operate and relate to the private sector.

Good governance is, of course, essential insofar as it provides households with greater clarity and investors with greater assurance that they can secure a return on their efforts. Placing emphasis on governance also has the apparent virtue of helping to shift the focus of reform toward inherently desirable objectives. Traditional recommendations like free trade, competitive exchange rates, and sound fiscal policy are worthwhile only to the extent that they achieve other desirable objectives, such as faster economic growth, lower poverty, and improved equity. Continue reading →

“Over the last few years, colonialism, especially as pursued by Europeans, has enjoyed a revival in interest among both scholars and the general public. Although a number of new accounts cast colonial empires in a more favorable light than has generally been customary, others contend that colonial powers often leveraged their imbalance in power to impose institutional arrangements on the colonies that were adverse to long-term development. We argue here, however, that one of the most fundamental impacts of European colonization may have been in altering the composition of the populations in the areas colonized. The efforts of the Europeans often involved implanting ongoing communities who were greatly advantaged over natives in terms of human capital and legal status. Because the paths of institutional development were sensitive to the incidence of extreme inequality which resulted, their activity had long lingering effects. More study is needed to identify all of the mechanisms at work, but the evidence from the colonies in the Americas suggests that it was those that began with extreme inequality and population heterogeneity that came to exhibit persistence over time in evolving institutions that restricted access to economic opportunities and generated lower rates of public investment in schools and other infrastructure considered conducive to growth. These patterns may help to explain why a great many societies with legacies as colonies with extreme inequality have suffered from poor development experiences.”

“The Indian economy has witnessed tremendous growth recently, but millions of people have been left untouched; some may have even been made worse off. In spite of the rapid population growth, the proportion of people below the poverty line has been coming down over the decades. The question is whether faster growth (claimed to be the result of the economic reforms started in the early 1990s) has led to faster decline in the proportion of the population below the poverty line.

Poverty declined by 8.9 percentage points in the pre-reform period and 7.8 percentage points in the post-reform period. But over a third of the population still remains in poverty in spite of growth rates that are claimed to be spectacular. The per capita availability of foodgrains has increased only about 10 percent since 1950.”

“Dhaka’s population has grown from 7 million in 1991 to 11 million today. Clearly the city is not prepared for this, compelling many people to live in the open, covered only by bamboo, sacking, polythene or cardboard. Such unprecedented urban growth is placing a strain on municipal management and, as ever, the burden falls heaviest on the poor. Local governments especially are proving ill equipped to cope with the additional demands for land, housing, food, services and infrastructure, and have difficulty with the environmental and social costs of rapid urbanization.It is now accepted by most international agencies and professionals that urbanization is inevitable, and a precondition to economic and social development. It is now acknowledged that for all their problems, urban areas are the primary engines of economic growth, as well as social and technical innovation. The evidence shows that cities generate a disproportionately higher ratio of central government revenues and economic activity relative to their population levels. The challenge is therefore to evolve appropriate and sustainable ways of managing the urbanization process, rather than seeking to prevent it.”

Let me begin by thanking Shirkat Gah for arranging this opportunity and you all for being here to exchange views. I am happy to see so many young faces here. This represents a change. I sensed the first indication of change in October 2005 when the earthquake hit. Young educated people, many of whom had never washed a spoon in their own houses, lived in tents and helped the victims. I think that something happened to bring a generation alive and we are seeing it again. In the current movement today, we may agree with a lot of things, not agree with a lot of things, but the point is that you are concerned, and that has been missing for 20 years, and 20 years is a long time. It’s a whole generation of people; people especially those in their 30s today, who in their own student days and youth were completely unassociated with any social issues. So I find this a very refreshing change and I consider myself fortunate that I am being able to interact with you today.

Now to the subject of economics. I know most of you do not have any economics background, but I will try to be simple. My ability to speak economics in rather simple language developed because when I started my career I started working with trade unions and I had to explain economics to people who were at best matriculates or even less, and that’s where I developed this ability to talk economics in the lay person’s language. I guess there was some kind of a social consciousness. I had no need to work with trade unions; I could have done consulting for the World Bank, or joined the World Bank. In fact I had an offer from an international bank. But like you, I thought I have to work with people and it is working with people that gave me the ability to speak the language of the people.

You have heard for the last 5 years at least, stories of economic miracles. Why is it that this miracle has begun to evaporate overnight? What kind of miracle can it be that is not sustainable? When General Musharraf made his speech on 2nd or 3rd November 2007, one of the things he cited as a reason for taking this extreme action was that the economy was going down. This was the first time anyone from the government side had admitted that the economy was going down. Otherwise when we were saying that the economy is not doing well we got very angry responses. So now we see that there are so many problems with the economy; there is a wheat crisis and flour is simply not available. It was in the newspaper a few days ago that oil stocks are down to less than a week. Why? What happened? Why are oil stocks down? There are other crises. Power of course is not there, we are all living with power shortages and power breakdowns, exports are stagnant and some categories of textile exports have actually declined. Our inflation is out of control and even the rich are feeling its pinch. So why has this happened all of a sudden? Where has the miracle gone? Where was the miracle? Continue reading →

The year 2008 marks a watershed in human history when, for the first time, more than half of humanity of about 3.3 billion people will come to live in towns and cities. This fact is particularly salient for South Asia, home to over 1.6 billion people or a quarter of humanity, of which a third live in urban areas. As the world becomes increasingly urban, the centre of gravity of this process is moving to South Asia which will account for five of the world’s 10 biggest cities within seven years time, namely, Delhi, Dhaka, Karachi, Kolkata and Mumbai. By the same year, 2015, a total of about 700 million South Asians will live in towns and cities, a colossal number by any yardstick.

At the same time, South Asia is witnessing rapid economic growth and transformation, and its towns and cities are at the heart of this process. Growth is taking place in dynamic sectors such as manufacturing, information technology, high-end service industries, trade, retail, and banking, insurance and finance, all of which are urban-centric. By the year 2011, the urban share in India’s national income is expected to go up to 65 percent even though only slightly more than 30 percent of the population will be urban by then. In Pakistan and Bangladesh, the hypertrophic cities of Karachi and Dhaka respectively dominate the economy. The mega-city of Karachi, for instance, not only accounts for about a tenth of the total population of the country’s 165million people but it also generates 60 to 70 percent of national revenue and over 40 percent of the value added in manufacturing.

While the Indian success story is well known (it is at present the second fastest growing economy in the world), that of Pakistan is less well so. Despite the political turbulence, its economy too has been doing quite well. On 24 January 2008, The Economist newspaper spoke highly of the latter’s economic growth (ranging at over 7 percent annually) and said it had the best performing stock-market in Asia: Pakistani companies had high dividends on average – 4 percent – and a low price/earnings valuation – under 15 times. Sri Lanka too had (and still has) the potential to become an Asian Tiger, if only the ruinous civil war would stop. Continue reading →